Air pollution is a growing problem in most cities (big and small). The "Daily Dose" aims to disseminate the best available information on air pollution and engage in discussions to better understand the process of air quality management. For more details on the program, please visit http://www.urbanemissions.info

Monday, March 23, 2009

The Nano Car-nomics in India

As urbanization gathers pace in India, personal transport is among the priorities (for access and mobility), especially since mass transport is often not available or is of poor quality. Two wheelers - with the father driving, the elder child standing in front and the wife behind holding a baby – is very much the norm in this country. In an interview after unveiling the cheapest car, the Nano, to the world, Ratan Tata said that this two-wheeler image is what got him thinking that Indian families need a safer form of transport.

Safety on roads is the number one priority.

With more vehicles on road, safety is an issue for the person riding, other drivers, and the people walking, especially when a family is on the motorcycle. Is driving a car safer than driving a motorcycle, especially given the condition of roads or the regard for traffic management? An analysis of the roads and transport in India is presented in the Seminar Magazine in November, 2007.

Introduction of the cheapest car in the world had some heads turning and critics talking. Since unveiling of the Nano car in January, 2008, there has been an increased media attention towards possible traffic congestion problems and an increased number of articles projecting the serious impacts of a new fleet on road, and consequently on air pollution and health. (recent article in WIRED summarized some of these arguments).

People use a car because it is convenient and comfortable. In India, many people (who can afford to) prefer using cars to public transport for everyday travel - for work and leisure. Reasons are plenty – starting with safety on the road, breathing less pollution in the car (though car is breathing out gases and particulates), and more importantly lesser access to public transport. As a result, this decade, cities across India are experiencing a jump in private passenger vehicles and consequently deteriorated air quality, long tailbacks on the motorways and health complains (report by ADB in 2006 on EE & CC Considerations for On-road Transport in Asia).

Travel demand is growing rapidly due to continued economic success and is densely concentrated in certain parts of the networks and at certain times of the day (rush hours). Scenarios are different in different cities. For example, Mumbai depends on its subway system as much as it does on road transport by buses and taxies; Hyderabad and Chennai are a mix of bus and private vehicles; whereas Delhi and its satellite cities are dominated by private transport.

It is important to note that Delhi will be more connected with public transport as soon as the metro system is fully functional. These are just four examples from megacities. If left unchecked, the secondary cities, such as Pune, Indore, Mysore, Baroda, Vizag, and Chandigarh, which are following the path of more cars on lesser road space, will incur the rising cost of congestion, air pollution and health impacts. Ministry of Urban Development has a series of programs in place and has released "Transport Policies and Strategies for Urban India" in May, 2008 and hosting a national level workshop on Urban Mobility in December, 2008, to disseminate these policies for sustainable transport in India. Also see SUMA program by Clean Air Initiative for Asian Cities

But, this has nothing to do with the Nano car.

The relationship between traffic and congestion is not linear. According to an article by Dr. Narain of CSE (The Nano-flyover Syndrome), the average speeds on road reduced to 10 km/hr in 2006 compared to 30 km/hr in 1997. On an average, Delhi and Pune are registering ~1000 vehicles per day, compared to Hyderabad at ~600 vehicles per day. The trend continues in other large and small cities.Urban Air QualityEmissions from the transport sector are a significant and growing contributor to primary air pollutants such as particulates, sulfur oxides (mainly from diesel fleets), nitrogen oxides, and greenhouse gas emissions, and the emissions are expected to grow in the coming decade mainly due to increase in the shear number of vehicles in use (see the six-city source apportionment study). While the greenhouse gas emissions impact long-term economic growth by contributing to global climate change, the local pollutants are most critical and harmful to human health in the short-term. Among the air pollutants, PM is the primary pollutant associated with health risks.

In the Indian cities, the ambient concentrations of primary pollutants of PM, SO2, and NOx, increased significantly. In 2006, annual average PM10 (PM with aerodynamic diameter less than 10 micron meter) measured (by Central Pollution Control Board) in major Indian cities ranged between 50 micro-gm/m3 to 150 micro-gm/m3, with some daily highs of ~300 mg/m3, and exceeding the daily and annual average limits set by World Health Organization.

Increased vehicular activity on roads mean increase in the direct vehicular emissions (especially from diesel operated heavy duty vehicles and passenger vehicles) and indirect fugitive road dust - representing a significant source contributing to the generation and release of PM into the environment at the human breathing level. CPCB has compiled an extensive list of emission factors for major vehicle categories – Motorcycles (MCs), 3-Wheelers (3W), and Passenger Cars (P.Car). This list is representative of emission tests conducted by Automotive Research Association of India. The Nano is expected to comply with Bharat III standards, equivalent of Euro III standard (see Dieselnet for a summary of standards). Although the PM emissions per car are small, the total number of vehicles on road will impact the net rate in emissions.

Besides the direct exhaust emissions, a major source of PM is the fugitive dust due to vehicular activity on the road. This dust includes the wind blown dust which settles on the road, wear and tear of tires and the dry deposits of other pollutants. While we discuss transport sources, this is the source of most importance (especially in the developing countries, see Dust Busters) and forms the significant portion of the transport sector PM emissions.Estimating the road dust emissions is not an easy process. Assuming that the car weighs an average 2 tons and an average slit loading of 100 grams per square meter on the paved Indian roads, following empirical methodology presented in USEPA’s AP-42, I estimated an average of 30 gm/km of resuspended PM10 emissions. This implies, every new car on road for 30 km a day, 6 days a week on road will resuspend 0.28 tons of PM10 annually. Please note that this is assuming an average silt loading of 100 gm/m2, which could be a high number for a clean urban road or low for a rural unpaved road. Download the v-dust, vehicular fugitive dust calculator, here, to better understand the parameters involved in these calculations.

This when compared to an emission rate of 0.05 gm/km of PM (for a petrol based car with less than 1000 cc engine - see CPCB Emission Factors) is ~600 times more (=30/0.05). So, adding a car on the road is not the problem for air pollution, but the possible dust emissions due to an extra car on the road is.

PM, especially the fine fraction with aerodynamic diameter less than 2.5 micron is associated with a range of adverse health effects including hospitalization for lung and heart problems, increases in emergency room visits for lung problems, increases in days of restricted activity in adults and school absenteeism in children, increases in respiratory symptoms, and to some extent the increased risk of premature death (see "the Literature Review on Health Effects of Outdoor Air Pollution in Developing Countries" by Health Effects Institute). Irrespective of the vehicular type, any form of increased fossil fuel combustion will lead to increase in ambient concentrations and heightened health risks.

Still very little to do with the Nano, because the air pollution problems are already persistent in the developing countries and megacities are already under scrutiny for their compliance and exceedances to health guidelines (see the coverage on Beijing [1] [2] [3] air quality for the 2008 Olympic games and Delhi is next for the 2010 common wealth games).

Introduction of a new model car (cheap or expensive) is expected to add to the growing trend, but how much? The trend is expected to be any different, if it wasn't for the Nano, since the cities are already registering in excess of 600 vehicles per day?

Who Will Buy the Nano?

It is highly speculated that the majority of the buyers for Nano (expected for release in 2009) will come from the motorcycle users. But, I think, this may not be as much as it is anticipated, purely from the energy and pricing structure involved (also see the City Fix).

Energy and transport experts are in no doubt that in a growing economy like India, demand for cars through 2015 will be persistent at ~14% a year, maybe a little less in the megacities with saturation (see analysis by SIAM). The Nano car will be a success (similar to Maruti 800 when it arrived in the 80's). However, as the experts predict, it is inconclusive to say that the cheapest car in the world will be the new mode of transport for the middle income group and a majority of the motorcycles will shift to buy the Nano, especially in the immediate future.

There is also some discussion of Maruti 600 (and other manufacturers) in competition to the Nano in the similar price range.

A comparative operational assessment between motorcycles and the Nano cars is presented in the Table below. This is an assessment for a family traveling 30 km per day, six days a week and 52 weeks a year.

(authors interpretation)

These are still conservative estimates. On an average, new motorcycles are known to perform at 75 km a litre of gasoline and given the road conditions and congestion stats, cars are known to perform at no more than 15 km per litre of gasoline or diesel. Based on the fuel price alone, we are looking at 3-5 times higher expenses for a family converting their daily usage from a motorcycle to car.

On an average, a middle class family with a motorcycle in India earns between Rs.10K to Rs.15K per month. Above calculations reflect the higher end of Rs.15K per month. From the Table, the three times difference (4% vs. 13% between the operational costs of a motorcycle and a Nano) will be one of the deciding factors for a family. This is no chump change and a big jump in family expenses.

Note that this does not account for the price and interest difference they incur for 5 or 10 years on loans, insurance, and maintenance. As an already paid motorcycle is being replaced by a car, we are looking a 4% transport expense vs. 22% (includes payments). Also, the price included in the calculations is 1 Lakhs + 25% taxes and extras, which is for the base model only.

Motorcycles are by far the largest number in the country and will remain so for the coming decades. On the other side, a good price differential and extra tax for cars, the Nano car (or any of the other smaller and efficient models) could shift some people away from buying larger cars and utility vehicles.Similarly, an argument on how the Nano will cut into the 3-wheeler and taxi market, is stretching the limits. In the cities like Delhi, Mumbai, Hyderabad, or Bangalore, parking has already become a problem around the markets, shopping centers, and cinemas, and more cars will not make it easy. In India, main transport issue has always been access to mobility and preferably cheap, safe, and convenient, and that is one of the advantages with 3-wheelers and taxis in most of the cities.

Overall, the Nano will eat into some of the lower-end and higher-end motorcycle, scooter market, and to some extent the higher-end car market – which will depend on the fuel efficiency and the fuel prices in the coming years.

It is also expected to create a niche market of its own which did not previously exist with any of the big manufacturing companies. We can only hope that the niche market is not for the second or third car for the family as witnessed in the West.

Supply and Production Costs

The Nano car production hasn't started yet; the plant is still under construction and not expected to deliver the cars till 2009 or early 2010. Although a large number of orders are already in place. However, it is important to note that the current production capacity is only 250K a year, which is nothing compared to the number of in-use cars on the road today. According to the WIRED magazine article, company won't give an estimate of demand for Nanos.

"Eight million Indians currently own cars, according to the Mumbai-based credit-rating agency Crisil. Another 18 million have the means to buy one. However, the Nano could increase that pool of potential auto owners by as much as 65 percent, to 30 million, the organization reports." - this stat is still years from now and the production capacities are not there yet, and this is not necessarily due to introduction of the Nano car; it could be any the possible cheap cars (relatively) in the future.

The Nano is cheap at 1 Lakhs per car, which is approximately USD 2,500.00. This is the base model and with taxes and shipping charges, an extra 25% is added. Given the heat and humid conditions, the owners are expected to add some features like air conditioner, extra wipers, a radio, and a couple of other things, which will bring the car value to anywhere between 1.5 to 2 Lakhs. At the end, 1 Lakhs figure is just nominal.

According to an article in TIMESONLINE (published on August 5th, 2008) the final production costs are expected to be much higher than what was quoted in January, 2008, as surging raw material costs scramble its low-cost business model, according to industry insiders

Ratan Tata, the chairman of Tata, has admitted that he faces a dilemma. “If we pass on all costs to the consumer, it will affect demand, and if we don't, it will affect margins,” he told investors recently.

Ian Fletcher, of Global Insight, said: “I can't see the 100,000 rupee price being maintained for more than three months, largely to let Ratan Tata keep his price promise, before the company raises it.”

It will be interesting to see what the final production cost will be.

In Conclusion

Considering the rapid increase in private vehicles, both cars and two-wheelers, combined with the poor public transport system — traffic experts forecast that vehicular speed will drastically reduce in the coming decade, unless a new course of action is decided fast. Problem lies with the growing demand for vehicles, safety, and convenience. For middle & lower class populations (especially in the growing secondary cities), basically fight for "Access to Mobility".

Cars are not bad, but more cars on road make it worse. The current economic trend will not stop the consumer market from buying cars (the Nano or any other) and outcome of such life style (an increase in the social status) could be very sad for environment.

Could the public transport be a simple solution for these issues (see the example of Bogota)? As we argue about cars and motorcycles, we have to keep in mind the lack of "public transport" in place to take the current travel loads and convenience on roads. This is not to undermine the current infrastructure and urban planning programs in place to further promote the public transport in the big cities. In Mumbai, share of public transport via metro and buses is the largest and same is true for cities such as Kolkata and Hyderabad. In Delhi, a 100 percent CNG bus fleet is the single largest clean transport in the world (see Report by RFF in February, 2007).

To encourage people using public transport, certain improvements must be implemented, like: increasing of frequency of public transport, especially in rush hours, better travel comfort and accessibility (see article by ITDP on changes introduced for buses and pedestrians in Delhi)

A good public awareness campaign is necessary - explaining what the expenditures are - in terms on money (principle, loans, parking), time (behind the wheel on road, idling in congestion), and health (impacts of vehicular emissions and road dust).

To summarize, public transport and its clever use could bring us many advantages - it reduces air pollution, reduces traffic congestion, and makes life healthier. These benefits could be achieved by encouraging people to use urban transport together with improved service quality and ameliorating comfort of passengers; irrespective of the people's car Nano.